Business center helps family-owned companies

From its start in 1981, Lava Cap Winery in Placerville has been run by the Jones family. But the company was caught unprepared when co-founder David Jones, mastermind behind the operation, died three years ago.

Questions about how to run a small business without its leader were further complicated by the fact that five other family members participate in the venture.

The Capital Region Family Business Center is designed to provide support for business owners in this kind of quandary. It is the only organization in the region that is devoted exclusively to helping family businesses meet their unique needs.

“The greatest thing is you talk to other people going through the transition — both small businesses and some quite large — and you learn a lot from each other,” said Jeanne Jones, who founded Lava Cap Winery with her husband, David. Sons Tom and Charlie, along with their wives Beth and Noreen, helped turn an old pear orchard into a winery. All still work for the business.

A growing number of area businesses are getting and giving support through the Family Business Center.

The nonprofit was incorporated in 2007 with support from 14 founding families. Membership now stands at 40, but the center’s goal is 50 members by year-end, which would make it the largest program of its kind in the nation.

“Our mission is to help them grow and prosper through mentoring, learning and sharing,” said Jim Sabraw, executive director of the business center. “All family businesses — no matter how big — have the same generational issues. Small businesses can probably benefit even more than larger ones. They may not have thought of these things.”

Keeping harmony a challenge

Family businesses are estimated to make up more than 80 percent of U.S. businesses.

Extrapolated for the four-county Sacramento region, that translates to several thousand, Sabraw said. They vary in size from mom-and-pop operations to Raley’s, a member of the Family Business Center.

Roughly 30 percent of family businesses make it to the second generation; the percentage dwindles to 12 percent by the third generation and 3 percent for the fourth, according to Family Business Review, a quarterly journal on family-owned business.

“Keeping harmony in a family business is one of the challenges,” Sabraw said. “Sharing how to keep harmony and what role each family member plays is important. Not everybody wants to work in the business — or has the capability.”

There are somewhere between 50 and 125 family business centers nationwide, but the local program is believed to be the only one unaffiliated with a college or university. Programs are run at the University of the Pacific in Stockton and University of California San Francisco.

“This is one of the things that’s distinguished us from the get-go,” said Steve Bender, chief executive officer at Warren G. Bender and a founder of the local program. The Sacramento-based insurance brokerage was started by his father in 1938. The firm is now into the third generation and currently employs five people with the Bender name.

“We had no problems with affiliation with academia, but we wanted an organization of families about families, heavily influenced by volunteer efforts,” Bender said.

Building relationships

The center has no formal headquarters; Sabraw works part-time out of his house. A part-time administrator and lots of volunteers keep the program going on an annual budget of about $100,000.

There are two “affinity groups” that meet once a quarter. One is designed for chief executive officers, the other for folks in the next generation who are getting ready to run the company. The two groups meet jointly once a year.

Susan Walker is vice president at Larry Walker Associates, an environmental engineering and consulting firm in Davis. Her parents founded the firm but now participate at the board level. Their four children are equal owners; three work at the company. The Walkers also are one of the founding families of the business center.

“The benefits of a family business are far greater than I anticipated and, at times, the pain is greater than expected,” Walker said. “I’ve only been involved for seven years, but others have been doing it for generations. When hearing from them what worked and what didn’t, people are so authentic — and so honest about the beauty and the pain — it’s an incredible gift.”

The center does not offer consulting services by lawyers, accountants and others, but does provide speakers with that expertise. Sponsors run the gamut from asset and retirement management firm Genovese Burford & Brothers to Downey Brand LLP, Sacramento’s largest law firm. Gina Lera, a Downey Brand partner who specializes in trusts and estates, is on the business center board and chair of the membership committee.

“Businesses today have a lot of challenges with the economy, but one of the biggest hurdles in a family business can be the family itself,” Lera said, adding that learning from each others’ successes and mistakes is key. “We support the group and facilitate discussions or provide the structural background for these conversations. It helps us give back to the community.”

Disputes take a toll

The benefits of a family business are obvious, but so are the pitfalls.

“The nice thing about it is we all believe there is something very special about a family-owned business,” Bender said. “We are not accountable to Wall Street but to the fundamental family core values that we inject into the business.”

But disputes happen — and things get touchy fast when the disgruntled co-worker is a family member.

“When you are going down the road with some angst, it’s helpful to share information with someone who’s going down the same path,” Bender said.

Divorce is a huge issue, as evidenced by the high-profile legal fight between Frank and Jamie McCourt over ownership of the Los Angeles Dodgers baseball team following their divorce.

“With a 51 percent divorce rate in this country, divorce affects family business and succession,” said Mary Martinelli, a family law partner at Downey Brand. “One way or another, the business is drawn into the divorce.”

Clark Pacific, a design-build firm in West Sacramento that specializes in pre-cast concrete, joined the Family Business Center about 18 months ago to find out how others coped with succession.

Three generations of the Clark family work for the company.

“The forums are real open and frank,” said Bob Clark, president of operations. “A lot of others are in the same boat you’re in, some with good programs in place. You can question yourself, learn how they did it — and how to do it yourself.”

The Capital Region Family Business Center

What it is: A nonprofit created to help family businesses grow and prosperServices: Workshops, round-table discussion groups and social events